The futile arrogance of AIG outrage

posted at 8:51 am on March 17, 2009 by Ed Morrissey

The Barack Obama administration needed a new target for their populist rabblerousing, since they’ve apparently decided that Rush Limbaugh fights back and the oil companies don’t make enough of a profit to matter. The contractual bonus payouts at AIG came just at the right time for them to demonstrate moral outrage and get the people to aim their ire at a shared enemy. So far, few have figured out that the Obama administration enabled the bonus payouts:

A tidal wave of public outrage over bonus payments swamped American International Group yesterday. Hired guards stood watch outside the suburban Connecticut offices of AIG Financial Products, the division whose exotic derivatives brought the insurance giant to the brink of collapse last year. Inside, death threats and angry letters flooded e-mail inboxes. Irate callers lit up the phone lines. Senior managers submitted their resignations. Some employees didn’t show up at all.

Politicians and the public spent yesterday demanding that AIG rescind payouts that they said rewarded recklessness and greed at a company being bailed out with $170 billion in taxpayer funds. But company officials contend that the uproar is scaring away the very employees who understand AIG Financial Products’ complex trades and who are trying to dismantle the division before it further endangers the world’s economy.

“It’s going to blow up,” said a senior Financial Products manager, who spoke on condition of anonymity because he was not authorized to speak for the company. “I have a horrible, horrible, horrible feeling that this is going to end badly.”

Maybe it’s an Obama stimulus. After all, someone has to pay all of those guards, answer those threatening phone calls, and screen the mail for anthrax. Just think how many jobs got saved by the White House turning AIG into a pariah — after dumping tens of billions of dollars into it.

The nasty little secret at the center of all the outrage is that the Obama administration could have stopped the bonuses by simply stopping the bailout. They could have forced AIG into bankruptcy, which would have voided the company’s contractual compensation obligations. Instead, the Obama administration chose to inject liquidity into AIG, following the lead of the Bush administration, which had done the same thing. That kept AIG’s doors open, and therefore kept its contractual obligations to its employees intact.

Now Obama is outrageously outraged, as Allahpundit put it yesterday, but over what? A company complying with its contractual obligations? AIG has no more right to abrogate those contracts than any other employer would with its union contracts. Whether or not the compensation agreements reflect wisdom and managerial brilliance, they exist — and as a matter of law, AIG has to honor the commitments. Screeching about the bonuses now is not just futile, but a demonstration of the arrogance involved in these bailouts. If the government wants to tear up all the contracts, it will have to nationalize AIG and get Congress to approve it.

In the future, we can avoid having taxpayer dollars go to Wall Street bonuses by not bailing out private companies with taxpayer dollars.

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The nasty little secret at the center of all the outrage is that the Obama administration could have stopped the bonuses by simply stopping the bailout. They could have forced AIG into bankruptcy, which would have voided the company’s contractual compensation obligations. Instead, the Obama administration chose to inject liquidity into AIG, following the lead of the Bush administration, which had done the same thing. That kept AIG’s doors open, and therefore kept its contractual obligations to its employees intact.

Outrage for employees getting bonuses that “they earned” in their contracts by bringing more business for the company. This is outrageous that people are complaining.

How about calling for Franklin Reins and Jamie Gorelek and others at Fannie and Freddie returning their 10′s of millions of bonus dollars they got in “cooking the books” that got us here in the first place? How about Chris Dodd paying back the money for his sweetheart deal at Countrywide? Same for Barney Frank and the rest?

How about Obama returning the money he got in donations from all the Wall Street people who got bonuses and used that money to pay to get Obama elected?

Outrage should be shown to the Federal Government for the overspending and the theft of the hard working American People!!!

I’m sick of working to pay for the deadbeats, who Obama loves. This guy is a menace.

And why did that happen? So the BILLIONS could be paid out by AIG on credit default swaps to Goldman Sachs and several foreign banks. The bonus hub-bub is nothing more than an effort to distract us from where the REAL MONEY went.

AIG needs to stand up to the administration just like Rush did. The loud mouths in Washington are cowards, and scurry from the light of truth. I really don’t have a problem with AIG or their bonuses (wish my boss would give me on – I’ve earned one).

People need to stand up to the abuses that are coming out of D.C. The D.C. crown reminds me of a magician. They are throwing up a lot of “misdirection”. Wonder what it is they are trying to keep all of us from seeing.

The biggest story that will come out of all of this is the exposure of the inner workings of the Liberal talking point machine; the brainwash, the cover-up….

From the halls of Congress; From the presidents desk; the talking points are issued very early, and the news cycle is formed. CBS, NBC, ABC, CNN, MSNBC, NYT, LAT, and all others in step and on message.

Millions of Americans watch these outlets, and have come to the same conclusion “it must be the truth, every channel is reporting the same thing.” Exposing this plan of attack will be one of the biggest stories of this year.

Yep, there is strong evidence that we bailed out AIG to prevent the banks that traded with it without forcing AIG to post collateral on a daily basis won’t be forced to deal with that mistake. Had AIG been posting collateral all along, the rating agency downgrade would not have been a big deal.

That said, a bankrupt AIG, a bankrupt GS, a bankrupt Deutsche Bank, etc., would hardly have been a better situation that what we have now, although taxpayer money would not have been directly involved.

The bonus hub-bub is nothing more than an effort to distract us from where the REAL MONEY went.

CC

CapedConservative on March 17, 2009 at 8:58 AM

To be perfectly honest, in the nicest possible way, it doesn’t matter where the money went once our polticians made the decision to give them the money.

If AIG had set piles of taxpayer money on fire in their parking lots, it wouldn’t have mattered because they never should have gotten the money in the first place. Or in the second place. Or in the third place. And hopefully not a fourth place.

It’s funny.
There’s what, about $170 million in bonuses out of about a $170 billion bailout round. Roughly 0.1%

During the debates last fall, John McCain pointed out that Dear Leader had $900 million in earmarks IIRC in 2-3 years as a Senator. The Onion shot back that the deficit was $400 billion, so therefore the 0.225% was statistically meaningless. Now he’s upset that there’s a lower rate of contractually obligated compensation going out to employees? Compensation that is going to provide tax revenue to states and will get spent, helping to keep the economy going?

I just wonder how many of those AIG employees are now second guessing supporting Him in the election.

The employees who worked in the derivative section should be fired for making a lot of bad bets. The other ones who are continuing to provide value to the company should be compensated for their work.

God help us if these fools get their hands on the Health Care system. If you think it is expensive now wait till it is free!! I don’t want to think about what Cap and Trade will do to the energy costs. My God I need a drink!!

I thought I saw on Fox News yesterday that the NY Times reported that Geithner helped set up the retention plan. Even if that’s NOT the case, the administration knew these payments were coming, and they know that MORE payments are due later in the year. Regardless, if you’re still left at AIG, you’re likely a smart, rich, beleaugered, hated individual. Would we rather all these guys left? Would that help AIG get out of it’s current financial hole?

Word on the street is that a lot of them have already left, and that they’re in high demand. And they’re uniquely qualified to help clear up the derivitives problem now facing us.

Oh – and they have a signed contract. Putting details like that in writing is something legislators should be familiar with, I think THEY call it earmarks. Too bad they didn’t write anything in any of the bailout legislation that would’ve limited the bonuses.

Lastly – stimulus spends a billion a day, right? So we should only fight about this half-billion of AIG bonuses for what, 4 hours? Call me when you’re ready to complain about $700 Billion in excesses.

Didn’t someone say that the bonuses at the centre of this kerfuffle comprised of 0.1% of the bailout package given to AIG?

I am more wondering where the billions AIG pissed away went….

mjk on March 17, 2009 at 9:04 AM

I heard the bonuses were 10% of 1%.

Anyhoo, I’ve actually kept my mouth shut during all this “outrage,” because I thought, why not? What is the big surprise? I would think Obama would be glad to see this whole broo-haha come out in the media, because it takes the spotlight off his crapy economic skills. He’s loving this.

The plan was implemented because there was a significant risk of departures among employees at AIGFP, and given the $2.7 trillion of derivative positions at AIGFP at that time, retention incentives appeared to be in the best interest of all of AIG’s stakeholders.

So they’re paying a billion to keep guys who created a $2.7 trillion book of business. That’s understandable. But this?

guaranteed payments to employees if they worked through specified payment dates (or either resigned for good reason or was terminated without cause before the relevant dates).

Rewarding failure,
Signing bills they never read,
Drafting legislation allowing mortgages for deadbeats,
Claiming we lost the war as we approached victory,
Criticizing the surge before it was put into practice,
Throwing money at a failing education system,
Looking out for illegal immigrants,
Propping up unions that have outlived their usefulness,
Attacking private citizens as a distraction from their incompetence,

Home schooling is in the cross hairs, that’s for sure. We home schooled our youngest son, and are now fighting the system to get his credits applied. The teachers union is a mafia of all mafia’s… Unions are a cancer to this country. Unions and the Democrat Party are one in the same.

It’s a smokescreen to try and hide the fact that 10s of billions of American tax payer dollars went to foreign banks.

And besides, who actually reads the bills anymore? It’s a crisis and we have to act before, before, before — Wouldn’t it have been really easy to just put a clause in the TARP bill that says the money cannot be used for bonuses. Or sent overseas? Too bad none of the fear and crisis mongers did that … I guess the teleprompter didn’t care.

This is just another of the Obama administrations bait and switch tactics- There was NOTHING that told AIG how they had to use that money, there were NO controls in place. AIG is obligated to pay out those contracts. Barry is a lying sack of sh*t, he sees an opportunity to deflect attention from his ridiculous budget, and he’s grabbing it like a fat boy grabs cake, and even FOX has jumped on the “Bad AIG bandwagon”. Yeah, they’re bad, but our idiotic gov’t is much, much worse.

What they’re doing to the homes they defaulted on, they’re about to do to the largest financial corporation in the world.

jeff_from_mpls on March 17, 2009 at 9:16 AM

I just spewed water all over my keyboard!! LOL!! Congress and Barry’s bunch couldn’t run a one car funeral

Dire Straits on March 17, 2009 at 9:17 AM

Both of you are exactly right.

If the Republicans had an ounce of strategic sense in their tiny little heads, they’d be reframing the discussion around how Obama, et al, are negligent in managing AIG, a property they own. A Public property.

I just spewed water all over my keyboard!! LOL!! Congress and Barry’s bunch couldn’t run a one car funeral

Dire Straits on March 17, 2009 at 9:17 AM

Perfect example of this is the take over of the cafeteria at the Congress building by Pelosi. The Piglet fired the private firm that was in charge, and took over ownership. The Piglet put her management skills on display by losing millions (tax payer dollars) in her first year of ownership.

Bad ideas embraced by Democrats …. and Republicans
Rewarding failure, D&R
Signing bills they never read, D&R
Drafting legislation allowing mortgages for deadbeats, D&R
Claiming we lost the war as we approached victory, D&R
Criticizing the surge before it was put into practice, D&R
Throwing money at a failing education system, D&R
Looking out for illegal immigrants, D&R
Propping up unions that have outlived their usefulness, D&R
Attacking private citizens as a distraction from their incompetence, D&R

Hmmm, I wonder how everything got so screwed up? D&R

fogw on March 17, 2009 at 9:17 AM

There now it is 100% accurate. Let’s be honest and fix our own party too. D&R = Democrats and Republicans. I love how we blame the Democrats and convieniently forget what our own party did.

Just recently a judge in a divorce case ordered the wife to start sending her home-schooled children to public schools, even though the children test 2 years ahead of their peers. The judge said he “wanted them to be more well rounded”.

Is the title of this thread. Want to see arrogance? look in the mirror. What could be more arrogant than the republicans when they had the power? Only a fool would not acknowledge that. We need to stop being arrogant and put our nation above our party. So should the democrats but you can’t teach an old donkey new tricks. Can we teach and old elephant?

The Onion shot back that the deficit was $400 billion, so therefore the 0.225% was statistically meaningless. Now he’s upset that there’s a lower rate of contractually obligated compensation going out to employees?

BINGO… that needs to be the talking point for the intelligent thinkers & talkers… I’m not holding out much hope, no, much easier to join the merry bandwagon of capitalist haters.

AIG will become a pariah word/symbol to describe most government controlled cluster-f##ks, and by monetary comparisons makes Enron look like a lemonade stand.

American International Group (AIG) is a leader in insuring risk for institutions worldwide. Our U.S. government can not use unfunded taxpayer dollars to insure this business any more than it could insure Irish whiskey won’t be consumed today. As CapedConservative on March 17, 2009 at 8:58 AM said, this is nothing but a distraction to the billions already wasted—-like bailing out the Titanic with a thimble.

First, Congress seems to be the primary guilty party because it took us down this bailout road with AIG without addressing the matter of bonuses at the outset. This is what we get for having nitwits such as Barney Frank, Chris Dodd, Maxine Waters, and others overlooking these matters.

Second, as Ed points out, Obama and Geithner are acting as if this is news, when it’s not. Nice try.

Third, all that aside, I do think AIG has some explaining to do. The feds own 80% of the company, so AIG should explain the bases for these bonuses.

Generally speaking, I understand that AIG has two major divisions: an insurance division and a financial products division. I heard today that the insurance division is fine, but the financial-products division is the toxic waste dump. It sounds to me that the bonuses to those in the insurance division, if based on specified performance, are above reproach. But as far as bonuses to anyone in the financial-products division are concerned, I cannot fathom any set of circumstances in which employees in this division have done anything that warrants a bonus. But before screaming too loudly about this, I really would like to learn about the bonus criteria that resulted in awarding bonuses to employees who toiled in such a disastrously unsuccessful division.

Is the title of this thread. Want to see arrogance? look in the mirror. What could be more arrogant than the republicans when they had the power? Only a fool would not acknowledge that. We need to stop being arrogant and put our nation above our party. So should the democrats but you can’t teach an old donkey new tricks. Can we teach and old elephant?

kanda on March 17, 2009 at 9:28 AM

I can’t speak for anyone but myself, but you are mistaken if you think I’m not blaming most of the Republicans when I say Congress. I also blame Bush/Paulson.

It is all a mess, both parties. But it is easier to type Congress than Democrats and Republicans.

Wow! Thanks for that info. This is a discussion that needs to take place. WE, Americans, need to take inventory of our stock, and rid our country of all dead materials and programs. The public school system is a significant piece of the Liberal brainwash. This must end! School vouchers, private schools, and home schooling allows for options. The Liberal machine is standing in the way, led by the teachers unions and the Judges they OWN…. Having this conversation is important for the future of our country, as the public school system is not being 100% to teach our children math, science, english, & history… We all know that.

I’ve been of this belief for years now. Both parties are taking us to the same place; one by bus, and the other by rocket ship. We must wake up. Government is the problem, and Obama is taking the power of government to levels we have not seen before. Our country stands at the crossroads.

Some of the numbers in there are just mind boggling. For example, the guys they’re paying $165 million in bonuses to were responsible for $2.7 TRILLION in business.

These same guys are responsible for areas where a .1% change in their business climate could result in $700 million in losses for AIG. So it’s a pretty high-pressure job.

Under Connecticut law, employees could sue for DOUBLE the amount of the bonuses.

Failure to pay the bonuses could be construed as a cross default, which would allow many of their partners in the credit default swaps at the root of the current economic mess to jump out, sticking AIG (and us, now) with billions in losses.

Obama and his team are creating an outrage that may result in billions, if not trillions, of additional damage to the economy. Remember to thank Andrew Cuomo when AIG’s partners bail out on all of the credit default swaps.

AIG presented their contractual obligations over a year ago and Obama and his gaggle of lunatics knew the provisions. This phony act by Obama is just another attempt to stir populace furor. If anyone exemplifies the “gang that couldn’t shoot straight” it’s Obama and his merry band of incompetent Marxist nitwits.

I wouldn’t be at all surprised if what we are seeing now was planned all along. We might just be at that point of their Marxist plans where it’s time to end private contracts.

The libs were trying to push this stuff through with as little scrutiny and consideration as they could get away with. There are liberals who are on record calling it a “red herring” for conservatives to demand careful consideration of any consequences. A great depression would hit us by thursday if the bailout didn’t pass by monday, dontcha know. Perhaps now we know the reason for their haste.

This anger is misdirected and it is getting dangerous.
myrenovations on March 17, 2009 at 8:54 AM

Yep, A.I.G.’s CT office has armed guards to fend off angry mobs and If Cuomo succeeds in getting the names of the A.I.G. employees who are receiving contractually agreed upon bonuses, their lives will be in danger.

Meanwhile, one man, Franklin Raines, made off with $90 million (more than half the $165 million going to 5,600 A.I.G. employees) at Fannie Mae.

Also, if you look at these articles, you’ll see that employees were jumping ship to go to A.I.G’s competitors.

It’s indescribably exasperating to listen to outraged people like Greta Van Sustern, who is a freaking lawyer, express her shock that these contracts are being met, saying (I paraphrase) but when companies go bankrupt, contracts are broken all the time.

No kidding, Greta! Do you think you can figure out the difference between those companies and A.I.G.???

You are correct about public schools but it isn’t going to change. The bumper sticker for the NEA reads as follows: “You can have your public school system back when you pry it from my cold dead fingers.”

Amen! Not to mention Obama’s desparate attempt to lift up his crashing and buring approval numbers by going on LENO! Freakin’ LENO! Our President needs to go yuk it up on a comedy/gossip show… doesn’t that fall under conduct unbecoming of an officer? It should if it doesn’t.

Meanwhile the economy is still in free fall, private companies are paying out bonuses to their employees! Oh, the horror of it all! I’m just going to stuff my cash in the mattress, and rock back and forth shaking unconsolably in the corner for a few years. /sarc

Meanwhile, one man, Franklin Raines, made off with $90 million (more than half the $165 million going to 5,600 A.I.G. employees) at Fannie Mae.

Also, if you look at these articles, you’ll see that employees were jumping ship to go to A.I.G’s competitors.

It’s indescribably exasperating to listen to outraged people like Greta Van Sustern, who is a freaking lawyer, express her shock that these contracts are being met, saying (I paraphrase) but when companies go bankrupt, contracts are broken all the time.

No kidding, Greta! Do you think you can figure out the difference between those companies and A.I.G.???

AIG has no more right to abrogate those contracts than any other employer would with its union contracts.

See the problem is though that for GM & Chrysler to get the little loan amount they have gotten their CEO’s have to take only $1/year for salary despite what their contracts said and the union had it’s contract reopened (even though they are not due for another 3 1/2 years) and had they redone with major concession given.

All that had to be done to get the money, so why can’t AIG’s contracts be forced to be redone?

Yep, A.I.G.’s CT office has armed guards to fend off angry mobs and If Cuomo succeeds in getting the names of the A.I.G. employees who are receiving contractually agreed upon bonuses, their lives will be in danger.

Oh yeah, if Cuomo gets the names, the names and addresses will be on the internet within a few hours.

No it isn’t. What are you saying, because one or two RINOs fit the bill, we should therefore assign equal blame to all Republicans? You’re way off base. Democrats promote all of the bad ideas, collectively and individually. The same can’t be said for Republicans.

You’re painting with too broad of a brush. You must be a RINO yourself.

It’s going to blow up,” said a senior Financial Products manager, who spoke on condition of anonymity because he was not authorized to speak for the company. “I have a horrible, horrible, horrible feeling that this is going to end badly.”

You all do understand that what the above person is talking about is the global economy not AIG right?

AIG is the backdoor for the US to bailout Europe which some say has $27trillion in bad debt on their books. AIG thru their insurance policies has wrttien policies for that $27Trillion. The eiuropean banks submit insurance to cover their losses AIG pays their claims then AIg requests more money from the gov.

Could you imagine if the general public understood this? Could you imagine if ObamaBush came before the Americian people and said we need to take your money and save the SWiss/French/Germans from their greed?

No the guy is right this will end badly as in finacial ruin of all western countries badly.

I would submit that we start to study the Argentina model of what to do after the economy collapses.

If AIG goes down the world goes down. which at this point with the corruption/elitetism and cluelessness of those elites might not be a bad thing in and of itself

Obama and his team are creating an outrage that may result in billions, if not trillions, of additional damage to the economy. Remember to thank Andrew Cuomo when AIG’s partners bail out on all of the credit default swaps.

hawksruleva on March 17, 2009 at 9:40 AM

To paraphrase Jack Welch, they aren’t acting like the owners they are. They are acting like they don’t care about ever getting their money back. They are throwing stones at their own property instead of acting like responsible owners.

AIG is the backdoor for the US to bailout Europe which some say has $27trillion in bad debt on their books. AIG thru their insurance policies has wrttien policies for that $27Trillion. The eiuropean banks submit insurance to cover their losses AIG pays their claims then AIg requests more money from the gov.

Troubled insurer American International Group Inc., now 80% owned by U.S. taxpayers, spent the weekend deflecting mounting criticism of how government funds have been funneled to various banks…After calls for more transparency, AIG disclosed Sunday that roughly two-thirds of the $173.3 billion in federal aid it received has been paid out to trading partners such as banks and municipalities in the U.S. and abroad.

But that’s what it means for a company to be “systemically important” — that it has obligations to third parties, the failure of which would set off a domino effect of continuing collapse. When it is said that these “funds” are “funneled,” that’s just provocative language for saying that AIG was able to pay its debts, which was the whole purpose of the bail-out.